SYDNEY- Asian shares edged higher on Tuesday while the dollar remained on the backfoot for a third straight session, as heightened expectations of an imminent European rate cut helped whet risk appetite.
Gains were limited ahead of key inflation readings this week.
Europe is set for a slightly stronger open, with EUROSTOXX 50 futures up 0.2 percent . That would build on gains overnight after a slew of European Central Bank officials said the has room to lower interest rates as inflation slows.
With debate now shifting to subsequent moves, markets have fully priced in two rate cuts by October this year. That in turn guided Wall Street stock futures higher ahead of the reopening of US markets after a public holiday.
S&P 500 futures rose 0.1 percent and Nasdaq futures gained 0.2 percent .
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2 percent after a 0.9 percent increase on Monday. Taiwanese shares climbed 0.5 percent to a record high, while Hong Kong’s Hang Seng index trimmed some earlier gains to be up 0.1 percent .
Japan’s Nikkei on the other hand, slipped 0.2 percent , reversing some of a 0.7 percent advance a day ago.
“We’re heading into the northern hemisphere summer season. Traditionally that’s a time when markets just tend to get in that drift mode,” said Tony Sycamore, an analyst at IG.
Sycamore believes the Hang Seng has further to run higher after a recent leg up, as data is likely to support further improvements in the Chinese economy. China will release surveys of manufacturing and services activity for May on Friday.
“I like the idea of getting back into that trade on pullbacks and that’s something where I think it’s got further upside whereas the Nikkei to me there are question marks now hanging over that market.”
He added that Nikkei has failed to get back to near its record high in March and that there are signs that market participants are starting to take money out of the benchmark to invest in Chinese markets.
The big risk events this week are not due until Friday when US figures on core personal consumption expenditures (PCE) – the Federal Reserve’s preferred measure of inflation – and eurozone inflation data will set the tone for trading.
